Growing Through Diligence and Care

Transcription

1 Stock Code Growing Through Diligence and Care Interim Report 2016

2 Contents Corporate Structure 54 Financial Highlights 55 Board of Directors and Committees 56 Corporate Information 57 Shareholders Information and Financial Calendar 59 Chairman s Statement 64 Management Discussion & Analysis 72 Condensed Consolidated Income Statement 73 Condensed Consolidated Statement of Comprehensive Income 74 Condensed Consolidated Statement of Financial Position 76 Condensed Consolidated Statement of Changes in Equity 78 Condensed Consolidated Statement of Cash Flows 80 Notes to the Financial Statements 95 Others 95 Interim Dividend 95 Closure of Register of Members 95 Share Capital 95 Purchase, Sale or Redemption of the Company s Listed Securities 96 Directors and Chief Executive s Interests in Securities 98 Substantial Shareholders Interests in Securities 99 Corporate Governance 102 Model Code for Securities Transactions by Directors 103 Changes in Directors Information 103 Review of Interim Report by Audit Committee

3 Corporate Structure China Overseas Land & Investment Ltd. Property Development* Mainland China Hong Kong Macau Property Investment Mainland China Hong Kong London Planning and Construction Design Mainland China Hong Kong * Property development in 49 major cities in mainland China, including Beijing, Shanghai, Shenzhen, Guangzhou, Hangzhou, Shenyang, Changchun, Changsha, Chengdu, Chongqing, Dalian, Foshan, Fuzhou, Haikou, Harbin, Jinan, Kunming, Nanchang, Nanjing, Ningbo, Suzhou, Qingdao, Taiyuan, Tianjin, Urumqi, Weifang, Wuhan, Wuxi, Xi an, Xiamen, Yantai, Zhengzhou, Zhongshan, Zhuhai, Zibo, Changzhou #, Guilin #, Ganzhou #, Jilin #, Hefei #, Hohhot #, Lanzhou #, Nanning #, Nantong #, Shantou #, Shaoxing #, Yancheng #, Yangzhou #, Yinchuan # as well as in Hong Kong and Macau. # The cities where China Overseas Grand Oceans Group Limited ( COGO ) has operations; COGO also has projects in Beijing. China Overseas Land & Investment Ltd. Interim Report

4 Financial Highlights Profit Attributable to Equity Shareholders Revenue HK$ billion HK$ billion * 8.38* 25.28* 32.19* 1H12 1H13 1H14 1H15 1H16 1H12 1H13 1H14 1H15 1H16 Net Debt to Shareholders Funds % Shareholders Funds HK$ billion 32.1* * * 98.01* Net cash 1H12 1H13 1H14 1H15 1H16 1H12 1H13 1H14 1H15 1H16 * 1H12 and 1H13 figures have not taken into account the impact of the acquisition of properties from China State Construction Engineering Corporation Limited in May China Overseas Land & Investment Ltd. Interim Report 2016

5 Board of Directors and Committees Executive Directors Hao Jian Min Chairman and Chief Executive Officer Xiao Xiao Vice Chairman Luo Liang Nip Yun Wing Non-Executive Director Zheng Xuexuan Independent Non-Executive Directors Lam Kwong Siu Fan Hsu Lai Tai, Rita Li Man Bun, Brian David Authorised Representatives Hao Jian Min Xiao Xiao Nip Yun Wing (Alternate authorised representative to Hao Jian Min and Xiao Xiao) Audit Committee Li Man Bun, Brian David* Lam Kwong Siu Fan Hsu Lai Tai, Rita Remuneration Committee Lam Kwong Siu* Fan Hsu Lai Tai, Rita Li Man Bun, Brian David Nomination Committee Fan Hsu Lai Tai, Rita* Lam Kwong Siu Li Man Bun, Brian David * Committee Chairman China Overseas Land & Investment Ltd. Interim Report

6 Corporate Information Registered Office 10/F., Three Pacific Place 1 Queen s Road East, Hong Kong Telephone : (852) Facsimile : (852) Website : Company Secretary Keith Cheung, Solicitor Registrar and Transfer Office Tricor Standard Limited Level 22, Hopewell Centre 183 Queen s Road East, Hong Kong Telephone : (852) Facsimile : (852) is-enquiries@hk.tricorglobal.com Investor Relations Corporate Communications Department Telephone : (852) Facsimile : (852) coli.ir@cohl.com Public Relations Corporate Communications Department Telephone : (852) Facsimile : (852) coli.pr@cohl.com Legal Advisor Mayer Brown JSM Independent Auditor PricewaterhouseCoopers Certified Public Accountants Principal Bankers (In Alphabetical Order) Agricultural Bank of China Limited Agricultural Bank of China Limited Hong Kong Branch Bank of China Limited Bank of China (Hong Kong) Limited Bank of Communications Co., Ltd. Hong Kong Branch The Bank of East Asia, Limited China Construction Bank Corporation China Construction Bank (Asia) Corporation Limited China Merchants Bank Hong Kong Branch DBS Bank Ltd., Hong Kong Branch Hang Seng Bank Limited The Hongkong and Shanghai Banking Corporation Limited Industrial and Commercial Bank of China Ltd. Industrial and Commercial Bank of China (Asia) Ltd. Oversea-Chinese Banking Corporation Limited OCBC Wing Hang Bank Limited Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch Sumitomo Mitsui Banking Corporation United Overseas Bank Limited 56 China Overseas Land & Investment Ltd. Interim Report 2016

7 Shareholders Information and Financial Calendar Listing The Company s shares are listed on The Stock Exchange of Hong Kong Limited ( SEHK ) and certain notes issued by the Company s subsidiaries are listed in SEHK and/or other stock exchange. Stock Code Shares SEHK : Bloomberg : 688:HK Reuters : 0688.HK Notes in USD SEHK Bloomberg Reuters Note 1: China OVS N2011 EI XS Code: 4503 Note 2: China OVS N1702 EJ XS Code: 4533 Note 3: China OVS N2211 EJ XS Code: 4579 Note 4: China OVS N4211 EJ XS Code: 4580 Note 5: China OVS N1810 EJ XS Code: 5987 Note 6: China OVS N2310 EJ XS Code: 5988 Note 7: China OVS N4310 EJ XS Code: 5989 Note 8: China OVS N1905 EK XS Code: 5745 Note 9: China OVS N2405 EK XS Code: 5746 Note 10: China OVS N3406 EK XS Code: 5760 in Euro ISE SEHK Bloomberg Reuters Note 11: BYM68V0 CN OVS LD N1907 AF XS Code: 5541 in RMB SSE Note 12: Code: Note 13: Code: Remarks: Note 1: US$1,000,000, per cent. Guaranteed Notes due November 2020 issued by China Overseas Finance (Cayman) II Limited, a wholly owned subsidiary of the Company. Note 2: US$750,000, per cent. Guaranteed Notes due February 2017 issued by China Overseas Finance (Cayman) IV Limited, a wholly owned subsidiary of the Company. Note 3: US$700,000, per cent. Guaranteed Notes due November 2022 issued by China Overseas Finance (Cayman) V Limited, a wholly owned subsidiary of the Company. Note 4: US$300,000, per cent. Guaranteed Notes due November 2042 issued by China Overseas Finance (Cayman) V Limited, a wholly owned subsidiary of the Company. Note 5: US$500,000, per cent. Guaranteed Notes due October 2018 issued by China Overseas Finance (Cayman) III Limited, a wholly owned subsidiary of the Company. Note 6: US$500,000, per cent. Guaranteed Notes due October 2023 issued by China Overseas Finance (Cayman) III Limited, a wholly owned subsidiary of the Company. China Overseas Land & Investment Ltd. Interim Report

8 Shareholders Information and Financial Calendar (Continued) Stock Code (Continued) Notes (Continued) Remarks: (Continued) Note 7: US$500,000, per cent. Guaranteed Notes due October 2043 issued by China Overseas Finance (Cayman) III Limited, a wholly owned subsidiary of the Company. Note 8: U.S.$800,000, per cent. Guaranteed Notes due May 2019 issued by China Overseas Finance (Cayman) VI Limited, a wholly owned subsidiary of the Company. Note 9: U.S.$700,000, per cent. Guaranteed Notes due May 2024 issued by China Overseas Finance (Cayman) VI Limited, a wholly owned subsidiary of the Company. Note 10: U.S.$500,000, per cent. Guaranteed Notes due June 2034 issued by China Overseas Finance (Cayman) VI Limited, a wholly owned subsidiary of the Company. Note 11: EUR600,000, per cent. Guaranteed Notes due July 2019 by China Overseas Land International (Cayman) Limited, a wholly owned subsidiary of the Company. Note 12: RMB7,000,000, per cent. Notes due November 2021 issued by China Overseas Property Group Co., Ltd., a wholly owned subsidiary of the Company. Note 13: RMB1,000,000, per cent. Notes due November 2022 issued by China Overseas Property Group Co., Ltd., a wholly owned subsidiary of the Company. Financial Calendar Interim results : 22 August 2016 announcement Share register closed : 20 September 2016 Interim dividend paid : 5 October China Overseas Land & Investment Ltd. Interim Report 2016

9 Chairman s Statement BUSINESS REVIEW The world economy remained complicated and fast-changing amid sluggish economic growth in the first half of In the United States, recovery in the economy and in employment levels were both below expectations; in the Eurozone and in Japan, further easing measures had little effect on economic growth; and in emerging markets, economic downside risks lingered while capital outflows and currency devaluation persisted. During the first half of the year, amid an unsatisfactory economic environment abroad, China s exports continued to slow while capital investment and domestic consumption remained weak. As a result of the launch of growth-stabilising policies by the Chinese Government, the proportion of GDP from the service sector continued to increase while first-half GDP growth in China fell to 6.7%, but remained in line with the target for the whole year. In response to the slowing economy, China continued to implement monetary easing during the first half of the year. Through various measures, the Central Government injected more liquidity into the market. As a result of regulatory easing, property market sentiment and inventory levels both improved. Increases in home prices, transaction volumes and new investment were seen. Economic growth in Hong Kong and Macau was mild. The property markets there gradually returned to a stable level. During the period, the business performance of the Group was satisfactory. The results of the various key performance indicators demonstrated the accomplishment of the Group s strategic and operation targets and that the risks of the industry were under proper control. The Group together with its joint ventures and associates recorded contracted property sales amounting to HK$95.26 billion for the first half of the year (an increase of 11.5%) while the corresponding sales area was 6.01 million sq m. China Overseas Land & Investment Ltd. Interim Report

10 Chairman s Statement (Continued) BUSINESS REVIEW (Continued) The profit attributable to equity shareholders of the Company increased by 20.6% to HK$19.69 billion, and the net profit, after deducting HK$3.90 billion in the net gain after tax arising from changes in the fair value of the investment property portfolio, increased by 15.8% to HK$15.79 billion. The annualised average return on shareholders funds for the period was still over 20%. The revenue of the Group was HK$78.15 billion, representing an increase of 20.5% as compared to the corresponding period of last year. The operating profit of the Group was HK$28.31 billion, an increase of 21.5% as compared to the corresponding period of last year. Projects (including those by the joint ventures) with gross floor area ( GFA ) of about 7.13 million sq m were completed. The Group s value of sales from projects completed during the period and which was recognised as revenue in the first half of 2016 was HK$54.63 billion, while the Group s sales of properties completed before the end of 2015 amounted to HK$22.18 billion. The overall occupancy rate of the Group s investment properties was satisfactory. The total rental income for the period was HK$1.06 billion, representing an increase of 15.9% as compared to the corresponding period of last year. At end of June 2016, the Group s interests in joint ventures plus amounts due from and deduct amounts due to joint ventures remained at a low level of HK$14.08 billion. The contribution from investments in joint ventures increased by 58.0% to HK$500 million for the first half of the year. All joint ventures are financially sound. At the end of June, there were bank balances and cash of HK$6.46 billion in aggregate against aggregate bank borrowings of only HK$2.51 billion for the joint ventures. COGO is an associate of the Group and contributed profit of HK$240 million to the Group. Under the backdrop of accelerated consolidation for the China property market, the Company seized a good opportunity and on 14 March 2016 executed the sale and purchase agreement for the acquisition of the residential-focused property development projects from CITIC Limited ( the CITIC Property Acquisition ). The CITIC Property Acquisition was approved by the shareholders of the Company in the general meeting held on 20 July 2016, but the completion of which will proceed after fulfillment of the remaining conditions precedent to the aforesaid acquisition. The Board believes the deal is beneficial to the sustained development of the Group and will strengthen the leading status of the Group in the China property sector. 60 China Overseas Land & Investment Ltd. Interim Report 2016

11 Chairman s Statement (Continued) BUSINESS REVIEW (Continued) In the first half of the year, the Group acquired four land parcels in three mainland cities and Hong Kong, adding total GFA of 2.28 million sq m to the land reserve. As at end of June 2016, the total land bank of the Group was million sq m (attributable interest of million sq m) and the total land bank of COGO was 9.54 million sq m (attributable interest of 8.90 million sq m). The Group adheres to the principle of prudent financial management, endeavors to strike a balance between the cash inflow and outflow and to improve the financial strength of the Group on a sustainable basis. During the period, the total capital expenditure payments for the Group were HK$30.41 billion (of which HK$12.19 billion was spent on land premium). About HK$17.71 billion was paid on taxes, operation and marketing expenses and financial expenses. Due to improved liquidity in China, sales proceeds collection increased substantially to HK$72.07 billion. As a result of such combined effects, the Group was in a net cash position at end of June As at end of June 2016, the financial position of the Group was in a satisfactory condition; the equity attributable to the shareholders of the Company increased to HK$ billion; the Group had bank loans and notes payable amounted to HK$43.15 billion and HK$66.16 billion respectively; and bank balances and cash amounted to HK$ billion. PROSPECT Going into the second half of the year, it is expected that the global economy will strengthen. In the British referendum, the United Kingdom voted to leave the European Union. This unexpected result has triggered huge uncertainty in global financial markets. It is expected that more easing measures will be forthcoming globally and that the United States Federal Reserve will be more prudent toward any interest rate increases. Geopolitical problems in the Middle East, Europe and Asia will from time to time cause turbulence in global financial markets. Under the inflow of hot money, the threat of asset bubbles bursting in emerging markets will likely rise. The Chinese government will continue its loose monetary policy. It is expected that the annual GDP growth target of about 6.5% to 7.0% can be achieved. China Overseas Land & Investment Ltd. Interim Report

12 Chairman s Statement (Continued) PROSPECT (Continued) The satisfactory sales performance of the Group in the first half of the year confirms that the strategies of nationwide strategic development and developing high quality residential projects in the core areas of major mainland cities are correct. The Group will firmly push ahead with its branding strategy. The Group will strive to pursue the goals of rapid development, sales and cash collection in order to ensure overall satisfactory growth in both operation scale and profit, while maintaining satisfactory returns on shareholders funds. Taking into account market changes and the positive effects of the CITIC Property Acquisition, the Group has decided to revise upward the 2016 contracted sales target to HK$210 billion (include joint ventures and associates). It is expected that there will be additional policy supports on the development of the property market by the Chinese Government and the property market in China will improve moderately. However, market consolidation will proceed at a faster manner. Property developers which are weak in managerial and financial capability will likely be eliminated. Such trends present more opportunities than challenges to the Group. The rigid demand is strong and the prospects are promising in the property market in Hong Kong and Macau. The Group will stick to the strategy of participating in the market in a moderate manner. The Group will stick to its prudent financial management and control well its gearing level while holding a relatively high level of financial resources. Following the improvement in the liquidity of the mainland Chinese banking sector, the Group will have more diversified fundraising channels. During the year, the Group has been actively increasing its Renminbi debt onshore by various means. Cash collection in mainland China is also expected to be satisfactory. The debt profile of the Group will hence be enhanced further and more fundings will be available to support the business development. In the second half of the year, the Group will continue to seize opportunities to expand its land bank at low cost and determine its investment scale according to the sales performance and financial resources available. The prospect of the Group s property development business in China is bright and promising while that of Hong Kong and Macau is good. The Board is very confident of the future of the Group. The Group will persistently improve its management capability, operation mode and product structure, product quality and branding. The Group will not blindly pursue growth in scale but will try best to enhance its competitive advantages so as to maintain its pioneer and leading position in the China property industry. 62 China Overseas Land & Investment Ltd. Interim Report 2016

13 Chairman s Statement (Continued) PROSPECT (Continued) The Group will strive to achieve the corporate mission of Sustainability, Value-adding, Harmony and Win-win. To grow into an evergreen enterprise, the Group will move steadily and firmly ahead with its strategy of continuous strengthening of corporate governance, practising a high level of corporate citizenship, thus attaining a win-win outcome for the Company, its shareholders, business associates, staff members and the community. APPRECIATION Lastly, I wish to express my heartfelt appreciation to my fellow directors for their outstanding leadership, the shareholders and business associates for their support and trust and the entire staff for their dedication. By Order of the Board China Overseas Land & Investment Limited Hao Jian Min Chairman and Chief Executive Officer Hong Kong, 22 August 2016 China Overseas Land & Investment Ltd. Interim Report

14 Management Discussion & Analysis Overall Performance The management of the Group is pleased to report that the Group had satisfactory performance in the first half of the year The revenue of the Group was HK$78.15 billion (the corresponding period in 2015: HK$64.85 billion), representing an increase of 20.5%. The operating profit was HK$28.31 billion (the corresponding period in 2015: HK$23.29 billion), representing an increase of 21.5%. Profit attributable to equity shareholders of the Company amounted to HK$19.69 billion (the corresponding period in 2015: HK$16.32 billion), representing an increase of 20.6%. Basic and diluted earnings per share were HK$2.00 (the corresponding period in 2015: HK$1.90), an increase of 5.3%. As at 30 June 2016, the equity attributable to equity shareholders of the Company was HK$ billion (31 December 2015: HK$ billion), an increase of 5.2% as compared to the end of the previous year, while the book value of net asset per share was HK$20.44 (31 December 2015: HK$19.43), an increase of 5.2% as compared to the end of the previous year. Property Sales Revenue of property sales increased by 22.8% to HK$76.81 billion. Revenue from property sales mainly related to property projects such as No.1 Lake Lantern and Goldenmiles in Foshan, Grand Mansion in Shanghai, International Community in Ningbo, No.8 Milestone and Lane No.9 in Tianjin, International Community and Paramount Jade in Jinan, La Cite in Shenyang and The Gem in Zhuhai. Segment profit from property sales (including the Group s share of profits of associates and joint ventures) amounted to HK$20.49 billion, an increase of 7.5% comparing with the corresponding period of last year. Property Development Benefited from the continued monetary easing measures and also easing of the property regulatory policies, the sentiment of the property market has improved in the first half of the year. Rise in land prices, property prices and sales volume was generally seen. The property market in Hong Kong and Macau has gradually returned to normal level. As the leader in the mainland property sector, China Overseas Property ( ) has been pursuing sustainable and balanced development while putting emphasis on cash flow management and return on shareholders funds. The Group will not blindly pursue growth in scale. Even though several property developers announced sales of over HK$100 billion for the first half of the year, the Group still strives to ensure that the sales growth in each month should still be relatively stable and gross profit margin staying at satisfactory industry level. Contracted sales (including those of the joint ventures and the associates) of HK$95.26 billion was reported in the first half of 2016, an increase of 11.5% as comparing to the corresponding period of last year. Hong Kong and Macau recorded a satisfactory sales result of HK$6.42 billion. 64 China Overseas Land & Investment Ltd. Interim Report 2016

15 Management Discussion & Analysis (Continued) Property Development (Continued) 1H 2016 THE GROUP S CONTRACTED SALES AMOUNT BY REGION HK$ billion Hong Kong and Macau 8.0% (6.42) Hua Nan Region 31.1% (24.85) Western Region 4.6% (3.72) Northern Region 12.8% (10.24) Hua Bei Region 19.2% (15.33) Hua Dong Region 24.3% (19.43) Hua Nan Region : Shenzhen, Foshan, Zhongshan, Guangzhou, Changsha, Xiamen, Fuzhou, Zhuhai, Haikou Hua Dong Region : Suzhou, Nanjing, Ningbo, Hangzhou, Nanchang, Shanghai, Wuxi Hua Bei Region : Beijing, Tianjin, Jinan, Wuhan, Zhengzhou, Taiyuan, Zibo, Weifeng Northern Region : Changchun, Qingdao, Dalian, Shenyang, Yantai, Harbin Western Region : Chengdu, Xi'an, Chongqing, Kunming, Urumqi 1H 2016 THE GROUP S CONTRACTED SALES AMOUNT BY MONTH HK$ billion January February March April May June China Overseas Land & Investment Ltd. Interim Report

16 Management Discussion & Analysis (Continued) Property Development (Continued) During the period, 48 projects (including those by the joint ventures) with aggregate GFA of 7.13 million sq m were completed in 26 cities in mainland China and Hong Kong and Macau. The major projects completed for occupation were: GFA City Name of Project ( 000 sq m) Harbin The Majestic 261 Shenyang COLI City 196 Shenyang La Cite 311 Shenyang China Overseas Plaza 125 Changchun La Cite 118 Jinan Paramount Jade 1,202 Tianjin Lane No Zhengzhou Glorious Garden 168 Nanjing International Community 124 Ningbo La Cite 151 Ningbo International Community 380 Foshan The Majestic 186 Foshan Glorious Park 171 Foshan Goldenmiles 204 Xi an COLI City 151 Zhuhai The Gem 206 Shenzhen Glorious City 225 Wuxi The Imperial 155 Hangzhou Regent 138 Kunming Royal Peninsula 377 Urumqi View Above the Clouds 130 Suzhou #102 The Lagoon* 233 Hangzhou La Cite* 153 Chongqing The Throne* 232 5,802 * Joint venture projects on 100% basis The Group s sales of properties completed before the end of 2015 was satisfactory and the amount recognised as revenue amounted to HK$22.18 billion. Despite the fact that a large number of projects were completed for occupation in the first half of the year, properties completed and held for sale at end of June 2016 slightly increased as comparing to last year end and to 2.56 million sq m, at a low level for the industry. 66 China Overseas Land & Investment Ltd. Interim Report 2016

17 Management Discussion & Analysis (Continued) Property Development (Continued) To ensure sustainable rapid growth, the Group continues to expand sources in getting high quality land reserve through various means and ways. The Company announced in March the CITIC Property Acquisition which could inject up to about 30 million sq m of land resources into the Group in one shot. Coupled with the fact that the land markets in some cities were over-heated, the Group was very selective in replenishing the land reserve. In the first half of the year, the Group incurred HK$9.9 billion and acquired four land parcels in Jinan, Hong Kong, Nanchang and Changchun, adding GFA of 2.28 million sq m to its land reserve. Taking into consideration the effect of the CITIC Property Acquisition, it is expected that the Group will continue to be prudent in replenishing its land reserve in the second half of the year. The land parcels added in the first half of year 2016 were: City Name of Project Attributable Interest Land Area ( 000 sq m) Total GFA ( 000 sq m) Land acquisitions by the Group Jinan Licheng District Huashan Project 100% 559 1,471 Hong Kong New Territories Tai Po Project 100%* Nanchang Donghu District Qingshanhu Project 100% Changchun Lvyuan District Jingyang Dalu Project 100% Total 806 2,280 * On 24 March 2016, 20% equity interest was disposed to China State Construction International Holdings Limited. It is expected that policy supports to the development of the property market by the Chinese government will remain in place and the property market will continue to improve. This is beneficial to the long term healthy development of the property sector. A better regulated market is also favorable to big players in increasing their market shares. However, operation environment for medium to small property developers is expected to be tougher and this will lead to market consolidation in a faster manner. The Group is optimistic about the medium and long term development of the mainland China property market. The Group will adhere strictly to prudent financial management and the strategy of sustainable development. Maintaining a reasonable level of high value land bank, faster development, more effective sales and cash collection, and strict risk control will help ensure the stable growth in the profit and the satisfactory return on the shareholders funds. The major focus of the Group in the second half of the year will be to expedite the consolidation of the projects from the CITIC Property Acquisition in an effective manner, thus providing momentum to the growth of the Group for this year and the next few years. China Overseas Land & Investment Ltd. Interim Report

18 Management Discussion & Analysis (Continued) Property Rental Revenue from property rental of the Group amounted to HK$1.06 billion, an increase of 15.9% comparing with the corresponding period of last year. The rise in rental income was mainly due to higher market rent and occupancy rate. Segment profit amounted to HK$8.53 billion which include the gain arising from changes in fair value of investment properties amounting to HK$5.27 billion (net gain after deferred tax was HK$3.90 billion). Besides, there was a gain on disposal of subsidiaries and investment properties amounting to HK$2.48 billion. The Group, through the disposal of the entire issued share capital and shareholders loans of some subsidiaries, completed the disposals of two investment properties in Hong Kong, namely China Overseas Building and Hoover Towers (Tower V), during the period. The total considerations were HK$4.83 billion and HK$510 million respectively. Such disposals contributed a net gain of HK$1.64 billion to the Group during the period. Besides, disposal of investment properties in Beijing contributed net gain before tax of HK$840 million. There was no disposal of investment properties in corresponding period of last year. Other Operations Revenue from other operations amounted to HK$270 million (the corresponding period in 2015: HK$1.38 billion), a decrease of 80.4% comparing with the corresponding period of last year. In October 2015, the Group completed the spinoff and separate listing of its property management business. The revenue from other operations during the period is mainly contributed from its Hua Yi Design businesses. Liquidity, Financial Resources and Debt Structure The Group continues to adopt prudent financial policies. Finance, fund utilisation and fundraising activities are subject to effective centralised management and supervision. The Group maintains reasonable gearing level and adequate cash balances. Mainly due to the likely completion of the CITIC Property Acquisition in the third quarter of the year and hence the injection of huge amount of land bank in one shot, the payment for land premium for new land parcels reduced significantly during the reported period. Due to improved liquidity in the banking sector in China, cash collection for the Group was close to HK$72 billion for the first half of the year. The Group was then in a net cash position for the first time in more than 10 years. 68 China Overseas Land & Investment Ltd. Interim Report 2016

19 Management Discussion & Analysis (Continued) Liquidity, Financial Resources and Debt Structure (Continued) The overall financial position of the Group was satisfactory. Interest cover (measured by the ratio of operating profit less interest income to the total interest expenses) increased from 9.9 times during the six months ended 30 June 2015 to 12.3 times, still at a satisfactory level. The weighted average borrowing costs of the Group was maintained at around 3.97% (total finance costs divided by the weighted average borrowings), at the lowest level for the industry. At end of June 2016, there was unpaid land premium of HK$4.0 billion while bank borrowings due to mature in the second half of the year amounted to HK$1.23 billion. Taking into account that sales proceeds collection will continue to improve in the second half of the year and even though as much as HK$80 billion of shareholders loan and bank loans related to the CITIC Property Acquisition need to be repaid or refinanced, the Group s financial position at the year end should still maintain at a satisfactory level. As at 30 June 2016, consolidated bank borrowings and notes payable of the Group amounted to HK$43.15 billion (31 December 2015: HK$49.26 billion) and HK$66.16 billion (31 December 2015: HK$66.20 billion) respectively, of which 25.2% was denominated in Hong Kong dollars, 44.1% was denominated in US dollars, 21.1% was denominated in Renminbi, 7.8% was denominated in Euro and 1.8% was denominated in Pound. As at 30 June 2016, the Group had bank balances and cash amounting to HK$ billion (of which 8.4% was denominated in Hong Kong dollars, 0.5% was denominated in US dollars, 90.8% was denominated in Renminbi, 0.2% was denominated in Pound and minimal amounts were denominated in other currencies) and unutilised banking facilities amounting to HK$9.78 billion. Except for the offshore RMB loans amounting to RMB3.85 billion, all the bank borrowings (either in Hong Kong dollars, US dollars, Pounds or Renminbi) of the Group are at floating rates while all the bonds (either in US dollars, Euro and Renminbi) are at fixed interest rates as at end June The Group has not entered into any financial derivatives either for hedging or speculative purposes. Taking into account of the potential increase in interest rates and the possible fluctuations in the exchange rate of Renminbi, the Group will prudently consider entering into currency and interest rate swap arrangements to minimise such exposures if and when appropriate. China Overseas Land & Investment Ltd. Interim Report

20 Management Discussion & Analysis (Continued) Liquidity, Financial Resources and Debt Structure (Continued) It is expected that more investment and acquisition opportunities will be available as the consolidation of the China property industry accelerate. The Group will continue to take full advantage of its competitive edge in having various fundraising platforms in and outside China. Subject to the overriding principle of prudent financial management, the Group will seek opportunities to increase its financial resources so as to provide solid support to the rapid development of the Group. DEBT MATURITY PROFILE AT 30 JUNE 2016 HK$ billion Within 1 year 1-3 years 3-5 years 5-10 years Over 10 years Notes payable Bank borrowings INTEREST BEARING DEBTS BY CURRENCY AT 30 JUNE 2016 EUR guaranteed notes payable 7.8% GBP bank borrowings 1.8% RMB notes payable 8.6% RMB bank borrowings 12.5% HKD bank borrowings 25.2% USD guaranteed notes payable 44.1% 70 China Overseas Land & Investment Ltd. Interim Report 2016

21 Management Discussion & Analysis (Continued) Corporate Citizenship To serve the community has always been the corporate motto, philosophy and mission of the Group. The Group has always tried its utmost to commit its corporate social responsibilities and share its success with the community. Through its hearty and active involvement in charitable activities, educational contributions, environmental protection, improvement of life quality, customer service and staff development, the Group succeeds in promoting a harmonious and balanced community. The Group continues to promote its charitable commitment along with its wellestablished brand of ( The sea has no limit and love has no boundary ) and put in place medium to long term planning to meet its corporate social responsibility, including an ongoing campaign of sponsoring and soliciting donations for the construction of one China Overseas Hope School every year. The Group has so far built ten Hope Schools in Hanzhong of Shaanxi, Nanchuan and Yunyang of Chongqing, Changchun of Jilin, Dujiangyan of Sichuan, Shenyang of Liaoning, Jinan and Qixia of Shandong, Quzhou of Zhejiang and Huaihua of Hunan respectively. As a leading property developer in China, while developing quality residences, the Group has placed great emphasis on environmental protection and energy conservation, affirmed its value to sustainable ecological concepts, implementing lowcarbon buildings and to cultivate a quality and green society. Human Resources The Group always regard talent strategy as one of the most important strategy and human resources as its most precious resources. After spinning off its property management business, the number of the Group s employees has decreased substantially to about 4,500. The Group has established a comprehensive training and cultivation system, providing the staff with security by an all-round mechanism as well as resources to support them to understand the Company s strategies, adapt to the corporate culture, enrich their professional knowledge and strengthen their management capability. To further enhance the continuity and sustainability of business, the Group has adhered to the two-pronged recruitment strategy of Sons of the Sea and Sea s Recruits while continued to expand the recruitment network to secure abundant supply of high-calibre staff to support the Group s rapid development. In recognition of its strong talent branding and the outstanding employer image, the Group was presented with numerous honours and awards, including the The Best Employer in China Award 2015 (hosted by and Top 50 Best Employer in China Award China Overseas Land & Investment Ltd. Interim Report

22 Condensed Consolidated Income Statement The unaudited consolidated results of the Group for the six months ended 30 June 2016 and the comparative figures for the corresponding period in 2015 are as follows: Six months ended 30 June Notes HK$ 000 HK$ 000 (Unaudited) (Unaudited) Revenue 5 78,149,549 64,848,644 Business tax (3,434,167) (3,264,137) Net revenue 5 74,715,382 61,584,507 Direct operating costs, exclude business tax above (52,676,176) (40,674,298) 22,039,206 20,910,209 Other income and gains, net 483, ,938 Gain arising from changes in fair value of investment properties 5,273,031 3,551,483 Gain on disposal of investment properties 837,759 Gain on disposal of subsidiaries 6 1,640,289 Selling and distribution costs (998,802) (937,363) Administrative expenses (961,889) (1,016,964) Operating profit 28,312,905 23,294,303 Share of profits of Associates 239, ,974 Joint ventures 502, ,943 Finance costs 7 (293,213) (282,084) Profit before tax 28,761,980 23,556,136 Income tax expenses 8 (8,543,516) (6,839,247) Profit for the period 9 20,218,464 16,716,889 Attributable to: Owners of the Company 19,685,530 16,317,238 Non-controlling interests 532, ,651 20,218,464 16,716,889 HK$ HK$ EARNINGS PER SHARE 10 Basic and diluted China Overseas Land & Investment Ltd. Interim Report 2016

23 Condensed Consolidated Statement of Comprehensive Income Six months ended 30 June HK$ 000 HK$ 000 (Unaudited) (Unaudited) Profit for the period 20,218,464 16,716,889 Other comprehensive income Items that will not be reclassified subsequently to profit or loss Exchange differences on translation of the Company and its subsidiaries (5,031,859) 63,626 Exchange differences on translation of joint ventures (488,516) 5,032 (5,520,375) 68,658 Item that may be reclassified to profit or loss Exchange differences on translation of associates (225,464) 2,843 Other comprehensive income for the period (5,745,839) 71,501 Total comprehensive income for the period 14,472,625 16,788,390 Total comprehensive income attributable to: Owners of the Company 14,029,014 16,387,314 Non-controlling interests 443, ,076 14,472,625 16,788,390 China Overseas Land & Investment Ltd. Interim Report

24 Condensed Consolidated Statement of Financial Position 30 June December 2015 Notes HK$ 000 HK$ 000 (Unaudited) (Audited) Non-current Assets Investment properties 66,070,393 64,057,066 Deposit for acquisition of an investment property 166,555 Property, plant and equipment 1,173,413 1,222,990 Prepaid lease payments for land 122, ,302 Interests in associates 5,603,628 5,589,294 Interests in joint ventures 9,095,865 9,420,805 Investments in syndicated property project companies 24,233 24,233 Available-for-sale investments 30,693 31,392 Amounts due from joint ventures 2,013,430 1,971,029 Goodwill 64,525 64,525 Deferred tax assets 3,077,409 3,011,132 87,275,922 85,686,323 Current Assets Inventories 56,103 60,304 Stock of properties 180,168, ,182,608 Land development expenditure 5,602,903 3,158,493 Prepaid lease payments for land 4,044 4,022 Trade and other receivables 12 10,104,442 11,203,163 Deposits and prepayments 5,923,869 6,759,833 Deposits for land use rights for property development 3,184,151 4,492,733 Amounts due from fellow subsidiaries 2,635, ,423 Amounts due from associates 404, ,295 Amounts due from joint ventures 4,886,737 4,453,866 Amounts due from non-controlling shareholders 856, ,645 Tax prepaid 3,398,046 3,282,152 Bank balances and cash 117,973, ,445, ,198, ,624,181 Assets held for sale 905, , ,104, ,550, China Overseas Land & Investment Ltd. Interim Report 2016

25 Condensed Consolidated Statement of Financial Position (Continued) 30 June December 2015 Notes HK$ 000 HK$ 000 (Unaudited) (Audited) Current Liabilities Trade and other payables 13 34,212,170 34,643,922 Pre-sales deposits 39,995,026 47,494,710 Rental and other deposits 1,506,924 1,863,896 Amounts due to fellow subsidiaries 947, ,156 Amounts due to associates 1,032,361 1,053,344 Amounts due to joint ventures 1,918,791 1,322,733 Amounts due to non-controlling shareholders 801, ,454 Tax liabilities 17,252,555 18,466,252 Bank borrowings due within one year 7,667,950 7,269,470 Notes payable due within one year 5,810, ,145, ,692,937 Net Current Assets 224,958, ,857,409 Total Assets Less Current Liabilities 312,234, ,543,732 Capital and Reserves Share capital 14 62,434,116 62,434,116 Reserves 139,109, ,123,409 Equity attributable to owners of the Company 201,543, ,557,525 Non-controlling interests 5,467,161 5,055,420 Total Equity 207,010, ,612,945 Non-current Liabilities Bank borrowings due after one year 35,487,450 41,986,405 Notes payable due after one year 60,348,144 66,200,380 Amounts due to non-controlling shareholders 1,033,828 1,238,436 Deferred tax liabilities 8,354,359 7,505, ,223, ,930, ,234, ,543,732 China Overseas Land & Investment Ltd. Interim Report

26 Condensed Consolidated Statement of Changes in Equity Unaudited Attributable to owners of the Company Share capital Translation reserve Merger reserve Other reserves PRC statutory reserve Retained profits Total Noncontrolling interests Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Note) At 1 January ,634,031 10,345, ,598 43,779 3,364,380 99,496, ,670,483 4,886, ,556,803 Profit for the period 16,317,238 16,317, ,651 16,716,889 Exchange differences on translation of the Company and its subsidiaries 62,201 62,201 1,425 63,626 Exchange differences on translation of joint ventures 5,032 5,032 5,032 Exchange differences on translation of associates 2,843 2,843 2,843 Total comprehensive income for the period 70,076 16,317,238 16,387, ,076 16,788, final dividend payable (Note 11) (3,451,203) (3,451,203) (3,451,203) Dividend paid to non-controlling shareholders (180,406) (180,406) Issue of shares 42,800,085 42,800,085 42,800,085 Acquisition of subsidiaries from the immediate holding company (2,308,770) (2,308,770) (2,308,770) Share of reserve of an associate 1 (136,593) (1) (136,593) (136,593) Return of capital to non-controlling shareholders (89,519) (89,519) Transfer to PRC statutory reserve 617,441 (617,441) At 30 June ,434,116 10,415,280 (1,522,172) (92,814) 3,981, ,745, ,961,316 5,017, ,978, China Overseas Land & Investment Ltd. Interim Report 2016

27 Condensed Consolidated Statement of Changes in Equity (Continued) Unaudited Attributable to owners of the Company Share capital Translation reserve Merger reserve Other reserves PRC statutory reserve Retained profits Total Noncontrolling interests Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Note) At 1 January ,434,116 2,938,455 (1,522,172) 47,139 4,224, ,435, ,557,525 5,055, ,612,945 Profit for the period 19,685,530 19,685, ,934 20,218,464 Exchange differences on translation of the Company and its subsidiaries (4,942,536) (4,942,536) (89,323) (5,031,859) Exchange differences on translation of joint ventures (488,516) (488,516) (488,516) Exchange differences on translation of associates (225,464) (225,464) (225,464) Total comprehensive income for the period (5,656,516) 19,685,530 14,029, ,611 14,472, final dividend paid (Note 11) (4,042,838) (4,042,838) (4,042,838) Dividend paid to non-controlling shareholders (31,442) (31,442) Return of capital to non-controlling shareholders (428) (428) Transfer to PRC statutory reserve 7,435 (7,435) At 30 June ,434,116 (2,718,061) (1,522,172) 47,139 4,231, ,070, ,543,701 5,467, ,010,862 Note: PRC statutory reserve of the Group represents general and development fund reserve applicable to subsidiaries which were established in accordance with the relevant People s Republic of China ( PRC ) regulations. China Overseas Land & Investment Ltd. Interim Report

28 Condensed Consolidated Statement of Cash Flows Six months ended 30 June HK$ 000 HK$ 000 (Unaudited) (Unaudited) Operating cash flows before movements in working capital 19,066,332 18,827,433 Decrease in stock of properties and deposits for land use rights for property development 22,842,288 5,009,671 Decrease/(increase) in trade and other receivables, and deposits and prepayments 1,814,715 (2,161,290) (Increase)/decrease in restricted bank balances (903,573) 64,796 Decrease in trade and other payables, pre-sales deposits, and rental and other deposits (6,407,503) (6,999,438) Other movements in working capital (622,751) 340,738 Cash generated from operations 35,789,508 15,081,910 Income taxes paid (8,702,931) (10,655,362) NET CASH GENERATED FROM OPERATING ACTIVITIES 27,086,577 4,426,548 INVESTING ACTIVITIES Dividends received from joint ventures 338, ,430 Additions of investment properties (2,070,332) (606,557) Advances to joint ventures (850,052) (447,657) Acquisition of subsidiaries (33,626) Net proceeds on disposal of subsidiaries 2,883,211 Other investing cash flows 985, ,632 NET CASH GENERATED FROM/(USED IN) INVESTING ACTIVITIES 1,287,726 (115,778) 78 China Overseas Land & Investment Ltd. Interim Report 2016

29 Condensed Consolidated Statement of Cash Flows (Continued) Six months ended 30 June HK$ 000 HK$ 000 (Unaudited) (Unaudited) FINANCING ACTIVITIES Interest paid (1,981,511) (2,202,948) Dividends paid to owners of the Company (4,042,838) Issue of shares 42,800,085 New bank loans raised 25,580,603 Repayment of bank loans (5,646,024) (19,336,420) Repayment to holding companies (29,939,956) (Repayment to)/advances from non-controlling shareholders (370,999) 224,454 Advances from joint ventures 798,207 41,845 Acquisition of subsidiaries from immediate holding company (2,308,770) Other financing cash flows 108,778 (365,668) NET CASH (USED IN)/GENERATED FROM FINANCING ACTIVITIES (11,134,387) 14,493,225 NET INCREASE IN CASH AND CASH EQUIVALENTS 17,239,916 18,803,995 CASH AND CASH EQUIVALENTS AT 1 JANUARY 100,572,591 58,280,945 EFFECT OF FOREIGN EXCHANGE RATE CHANGES (2,573,417) 23,346 CASH AND CASH EQUIVALENTS AT 30 JUNE 115,239,090 77,108,286 ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash 117,973,995 78,610,721 Less: restricted bank balances (2,734,905) (1,502,435) 115,239,090 77,108,286 China Overseas Land & Investment Ltd. Interim Report

30 Notes to the Financial Statements 1. Basis of Preparation These condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard ( HKAS ) 34, Interim Financial Reporting, issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ). The condensed consolidated financial statements should be read in conjunction with the Group s 2015 annual financial statements, which have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ). The condensed consolidated financial statements have been prepared on the historical cost basis except for investment properties and certain financial instruments, which are measured at fair values. The financial information relating to the year ended 31 December 2015 that is included in the condensed consolidated financial statements for the six months ended 30 June 2016 as comparative information does not constitute the Company s statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with Section 436 of the Hong Kong Companies Ordinance (Cap. 622) is as follows: The Company has delivered the financial statements for the year ended 31 December 2015 to the Registrar of Companies as required by Section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance (Cap. 622). The Company s auditor has reported on those financial statements. The auditor s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under Sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance (Cap. 622). 80 China Overseas Land & Investment Ltd. Interim Report 2016

31 Notes to the Financial Statements (Continued) 2. Application of New and Revised HKFRSs The accounting policies applied are consistent with those of the Group s annual financial statements for the year ended 31 December 2015, as described in those annual financial statements except for the adoption of amendments to HKFRSs effective for the financial year ending 31 December In the current interim period, the Group has applied, for the first time, the following amendments to HKFRSs issued by the HKICPA which are relevant to the Group: Amendments to HKAS 1 Annual Improvements Project Disclosure Initiative Annual Improvements Cycle The application of the above amendments to HKFRSs has had no material impact on the Group s results and financial position. The Group has not early adopted the following new and revised standards and amendments that have been issued but are not yet effective: HKFRS 9 Financial Instruments 1 HKFRS 15 Revenue from Contracts with Customers 1 HKFRS 16 Leases 2 Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 3 1 Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January The mandatory effective date will be determined The Group has already commenced an assessment of the impact of these new or revised standards and amendments, certain of which may be relevant to the Group s operations and may give rise to changes in disclosure, recognition and remeasurement of certain items in the condensed consolidated financial statements. China Overseas Land & Investment Ltd. Interim Report